Gold has traded between $1,199 and $1,215 so far today, and may have to yet again test key support around $1,180 after yesterday’s unexpectedly hawkish tone from the Federal Reserve that sent the U.S. Dollar Index (see updated chart below) to its highest level since the first week of the month…as of 7:30 am Pacific, Gold is down $10 an ounce at $1,202…Silver has retreated 55 cents to $16.54…Copper is off 4 pennies at $3.07…Crude Oil is off $1.03 a barrel at $81.17 while the U.S. Dollar Index is relatively flat at 86.04…
As expected, the Federal Reserve ended its bond-buying stimulus program yesterday but also gave a somewhat unexpectedly upbeat assessment of the U.S. economy which sent the greenback soaring, putting pressure on bullion…the central bank largely dismissed financial market volatility, a slowdown in Europe and a weak inflation outlook as factors that might limit progress toward its unemployment and inflation goals…ending Q3, the bank dropped a characterization of U.S. labor market slack as “significant” in a show of confidence in the economy’s prospects…
In a reflection of investor sentiment, SPDR Gold Trust said its holdings fell 1.2 tonnes to 742.40 tonnes yesterday, a 6-year low…last week, the fund reported its biggest weekly outflow this year…
On a more positive note, the International Monetary Fund reported that several world central banks continued to stock up on bullion in September…Russia, Azerbaijan and Kazakhstan all raised their Gold holdings…Russia led the way by adding 1.2 million ounces last month, the IMF said…it would be interesting to know how much China is adding…
Former Fed Chairman Alan Greenspan (1 in 6 Americans actually believes he is still the Fed Chairman) had this to say regarding China and its accumulation of Gold through a recent op-ed piece (“Golden Rule: Why Beijing is Buying) in Foreign Affairs magazine, published by the Council on Foreign Relations. “If China were to convert a relatively modest part of its $4 trillion foreign exchange reserves into Gold, the country’s currency could take on unexpected strength in today’s international financial system. It would be a gamble, of course, for China to use part of its reserves to buy enough Gold bullion to displace the United States from its position as the world’s largest holder of monetary Gold (as of spring 2014, U.S. holdings amounted to $328 billion). But the penalty for being wrong, in terms of lost interest and the cost of storage, would be modest,” Greenspan wrote…
Today’s Equity Markets
Asia
One of the most bullish charts on the planet is China’s Shanghai Composite (see updated chart below)…it keeps climbing a “wall of worry” and jumped another 18 points overnight to close at 2391, its highest level since early last month…China’s State Council said it would boost consumption in key sectors like e-commerce, housing, tourism and education…railway shares were the top gainers after China Railway Corporation said all 64 railway projects planned for this year would start before year-end…
Japan’s Nikkei average gained 104 points to finish at 15658…
Europe
European markets are modestly lower in late trading overseas…Germany’s unemployment rate held steady at 6.7% in October, and joblessness fell more than expected…however, regional inflation data for the country came in slightly lower than forecast…
North America
The Dow has climbed 93 points through the first hour of trading…U.S. Q3 GDP came in higher than expected at 3.5%…
The TSX is off 83 points, dragged down by the energy sector and a new post-Crash low in the Gold Index, while the Venture is off 6 points at 775 as of 7:30 am Pacific…
Shanghai Composite Updated Chart
Strangely, China’s Shanghai Composite and the CRB Index have been moving in sharply opposite directions the last several months…John correctly predicted a breakout in the Shanghai in late July when it pushed above the neckline in an inverted head and shoulders pattern, and since then the Shanghai has gained more than 200 points or close to 10%…there’s every reason to believe it’s on its way to at least the 2500 level where it will meet Fib. resistance…
CRB Index Updated Chart
The Venture has been hurting simultaneously with the CRB Index which has plunged 12% since its late June high of 313.27…Crude Oil forms a big component of the CRB but of course metals have suffered significantly as well…
Is there any good news here?…well, the CRB is now at previous support while very oversold conditions have clearly emerged…the CRB’s immediate challenge is to overcome the very pronounced downtrend line, and this could happen in November which historically for some reason has been the best month in the last half of the year…
CRB Index Historical Monthly Trading
Good riddance to the month of October which historically, next to May, has been the worst month of the year for the CRB Index going back to 1995 as you can see in this 20-year seasonality chart…
U.S. Dollar Index Updated Chart
This very bullish 2.5-year weekly U.S. Dollar Index chart shows continued RSI(14) overbought conditions but the probability appears high that a challenge of Fib. resistance around 88 is in the cards near-term…fundamental factors could help the greenback next week in the event the Republicans take control of the U.S. Senate (polls suggest they could also pad their current majority in the House)…such an outcome would likely be Dollar bullish…
Blackbird Energy Inc. (BBI, TSX-V) Update
The energy sector has been weak recently, of course, and a major factor in the Venture’s sharp decline…one bright light, however, has been Blackbird Energy (BBI, TSX-V) which fortunately also recently completed a large equity financing ($30 million)…on October 20, the company reported that it had spudded its first Middle Montney well at Elmworth…after completion of its first well, expected during the second half of next month, Blackbird will immediately commence the drilling of its second well at Elmworth targeting the Upper Montney…
Technically, BBI’s rising 100-day moving average (SMA) has provided excellent support since early this year…
BBI is off 2.5 cents at 36.5 cents as of 7:30 am Pacific…
Canada Carbon Inc. (CCB, TSX-V) Update
Canada Carbon (CCB, TSX-V) announced a couple of interesting appointments this morning to its advisory board, while drilling continues at its Miller Graphite Project as reported a week ago…technically, CCB found strong support this month at a long-term uptrend line…this 3-year chart shows an overall bullish trend very much intact…
CCB is up a penny at 23 cents as of 7:30 am Pacific…
Note: John, Terry and Jon do not hold share positions in BBI or CCB.
It’s psychological my friends. If Gold crosses below $1,200
Jon will be correct at $1,180.. Most times it’s all about
numbers & confused minds.
Comment by Bert — October 30, 2014 @ 7:15 am
Hello!
I am scared! How can the Fed end the bondbuing program? USA must pay debt so how is it possible? What will happen with gold now, I just cant get it!!
Comment by Yvonne Kindström — October 30, 2014 @ 8:41 am
Yvonne
Don’t be scared, it’s what it is. Please be reminded
there’s someone up above, looking down on tender love.
Anyway, the Fed. couldn’t spend forever, that was just a
temporary fix & now that our economies are looking up,
the market will soon realize that ending QE had to come.
The market will also realize that it’s participants’
are still alive, well & kicking. Worrying will only
add to our age & to lose one’s cash is bad enough,
but to look older sooner is double the trouble..
p.s. I also get scared every once in awhile
Comment by Bert — October 30, 2014 @ 9:56 am
@ Yvonne
The Fed buys the bonds on the secondary bond market, not the primary. That is to say it buys already existing bonds. The Fed does this not to finance government deficits (again, the bonds it buys aren’t newly issued), but to surpress interest rates. With QE, it targets the longer-term interest rates specifically, since short-term ones are already at zero.
Regarding new government bonds: right now, its mainly the American people themselves who are buying the newly issued bonds, since their savings rate has gone up dramatically since the start of the crisis. We’re now actually much less dependent on foreign (Chinese) bond buying than before.
What will happen to the POG is uncertain.
Comment by Tim — October 30, 2014 @ 10:02 am
I don’t think you can pay your debt by printing more money. Just doesn’t make sense.
Comment by Seedling — October 30, 2014 @ 10:28 am
BLO.V announced today it is spinning off it’s gold property. Haven’t heard much lately regarding their prototyppe. Maybe before the conference.
Cannabix management believes that a spin out of its exploration property will provide increased shareholder value. Cannabix’s main objective is to develop its patent pending marijuana breathalyzer for law enforcement and the workplace.
Read more at Stockhouse website
Comment by Dan — October 30, 2014 @ 12:02 pm
I’ve been a long time follower of Rick Ackerman, a trader who uses a system called hidden pivot. It’s pretty accurate when it comes to short term trading. Anyhow, he sees gold heading around $1125 in the short term. If that fails, $1000 gold is a certainty.
@Dan: It’d be in their best interest to have the prototype at the conference.
Comment by Chris — October 30, 2014 @ 12:12 pm
Hello Tim,
so the Fed only buy secondary bonds! But with no qe gold will go down, perhaps end the goldbullmarket, is it not so? Difficult to understand this!
Comment by Yvonne Kindström — October 31, 2014 @ 2:08 am
It’s not a Hallowe’en trick my friends, it’s real, Gold
is down another $25.00 this morning, no wonder Yvonne
Kinden was scared yesterday, her senses are keen for
sure. I’m not scared but i sure am disappointed &
prompts me to ask, where is Frank Holmes ?
Comment by Bert — October 31, 2014 @ 3:45 am
A little Halloween scare this morning for Gold investors…the TSX Gold Index telegraphed this yesterday with its drop to a new low…with the break below $1,180, assuming Gold doesn’t climb back above that later in the day, next major support level is $1,150 as John will show in a chart today…interesting times, and this is also when investors let emotions drive decisions and can easily make mistakes that others can profit from…Silver has strong support at $16 which it was expected to test…
Comment by Jon - BMR — October 31, 2014 @ 3:52 am
Good morning Jon
There’s not a darn thing we can do about anything anyway, except
cross our fingers & hope for the best. I don’t know if the margin
calls are the cause this morning, if not, we can expect a poor
start to next week. Let’s hope traders see this as a buying
opportunity & we see a reverse of Gold today, otherwise anything
that glitters today won’t include Gold…
Comment by Bert — October 31, 2014 @ 4:12 am
Bert, it is what it is. If this is the wash out stage, let’s get it over with. A couple of big down days to cleanse the precious metals market. I think they’ll keep doing this until the election next week; but after that I believe sanity and fundamentals will prevail.
Comment by chris — October 31, 2014 @ 5:24 am
Remember i sold GGI a few days ago at 0.225, who would
have thought that i would be the lead bidder this a.m.
at 0.17, how things can change. Anyway, be strong, at
least WE are still around & able to converse with each
other. Life is full of struggles & we the lowly group
don’t have to re reminded.
I don’t quite understand Toronto being up 120 pts this
a.m. while we fall down by 11
Comment by Bert — October 31, 2014 @ 6:04 am
bert,actually there is something we can do,and that is not to freak out,panic,it is not the actual metals that are sliding its the etf’s. gold and silver will have to correct themselves.plain and simple.
Comment by tombc — October 31, 2014 @ 6:48 am
I hope no one is taking my posts as if i am panicking,
no way, but the truth has to be told, i don’t like it,
and if i may, i will quote a few words of a song, i just
can’t help it, but things just happen that way. Nice to
hear from Chris & Tombc.
Comment by Bert — October 31, 2014 @ 7:32 am
It is not the end of QE its just on hold for a little while, all these employment numbers are lies from the US Gov’t so things will look good for the elections. The Fed’s biggest fear and that of the other Central Banks around the world is de-flation which is what we are closer to seeing right now than inflation. The Fed and the other Central Banks will do whatever it takes to avoid deflation and the only thing they know to do is to print print print, so when they start QE up again, gold will go thru the roof and we will definitely see inflation and after that higher interest rates. Its going to be ugly in my opinion…
Comment by Greg — October 31, 2014 @ 8:37 am
Hi Yvonne,
The POG is determined by supply and demand. The end of QE signals a stronger US market and higher future interest rates. Other things equal, that reduces demand for gold, and increases the supply since more people want to sell off their holdings. This puts pressure on the POG. However, that downward pressure can be offset by an increase in demand from for instance Asian consumers and central banks, who seem to have an increasing appetite for gold.
Comment by Tim — October 31, 2014 @ 9:03 am